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The New India Assurance Co.Ltd. v. Hussain Babulal Shaikh - (High Court of Bombay) (15 Nov 2016)

Motor Vehicles Act is social welfare legislation and if there is conflict between social welfare legislation and tax legislation, social welfare legislation will prevail



Petitioner-New India Assurance Company Limited filed instant petition challenging order passed by learned member of Maharashtra Accident Claims Tribunal, whereby an application of Respondent No.1 for issuance of warrant of attachment against Petitioner in execution of an award, for not depositing part of award amount, on ground that, same has been deducted as “tax deducted at source” (TDS), stands allowed. Issue which falls for consideration of the Court is 'whether the Petitioner would be justified in deducting tax at source (TDS) in respect of interest payment made under the award of the Tribunal.

As per Section 194A of Income Tax Act, 1961, when any person not being an individual or Hindu undivided family who becomes responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall at time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force. Sub-section (3) excludes the application of sub-section (1) and sub-clause (ix) thereof and provides that the provisions of sub-section (1) shall not apply to such income credited or paid by way of interest on the compensation awarded by the Motor Accident Claims Tribunal, where amount of such income or, as case may be, aggregate of the amounts of such income paid during financial year does not exceed Rs.50,000/. Thus, for exemption from provisions of Sub-section (1) of Section 194A, such income paid by way of interest on compensation amount awarded by Tribunal will not be liable for tax if aggregate amount of such interest income paid during financial year does not exceed Rs.50,000/¬.

The Division Bench of this Court in case of Gauri Deepak Patel & Ors. has accepted interpretation of Section 194A as laid down in decision of Gujarat High Court in the case of “Smt. Hansagauri Prafulchandra Ladhani Vs. Oriental Insurance Co. Ltd.” and accordingly, laid down a procedure under which Insurance companies or owners of the motor vehicles deposit the amount in compliance of the Award of Motor Accidents Claims Tribunal. Directions of the Division Bench lay down a complete scheme which the Insurance company is required to follow when the amount of compensation is deposited in pursuance of the Award of Tribunal which include the interest amount.

Resultantly, action of Petitioner deducting tax at source on interest awarded by Tribunal, without following mandate of Division Bench of this Court in Gauri Deepak Patel & Ors. Vs. New India Assurance Co.Ltd. & Anr. was unjustified and illegal.

Relevant : Gauri Deepak Patel & Ors. Vs. New India Assurance Co.Ltd. & Anr., New India Assurance Co.Ltd. Vs. Bhoyabhai Haribhai Bharvad, Smt.Hansagauri Prafulchandra Ladhani Vs. Oriental Insurance Co.Ltd., Section 194A of Income Tax Act, 1961


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